Feedback from group risk intermediaries on the barriers to securing new income protection business has consistently suggested that HR directors are often very interested in the product but that lack of suitable data to prove potential return on investment (ROI) means that the case cannot be sold to the finance director.
Such data needs to reflect the value of the overall income protection proposition and not just the average amount that has been paid out in claims. After all, many larger employers benefit from employees returning to work via insurer’s rehabilitation services within the deferred period, and smaller employers who never actually have employees with serious health problems can still benefit from a range of added-value services.
Aon Employee Benefits head of group risk Matthew Lawrence says: “All group income protection insurers are keen for their policy to be seen as more than a commodity product, as something that not only pays a financial benefit when there is a long-term absence case but also supports both the employer and employee achieve the best outcome.
“Part of this will relate to their claims management proposition, of which early intervention and rehabilitation services will be key. Therefore, promoting the value of these services and putting some tangible metrics around them is very important and should start making group income protection a much more value-based product. As an industry you would like to think that coming up with some consistent statistics that demonstrate the value would not be that difficult to do.”
The good news is that industry bodies are already on the case. Group Risk Development (Grid) has published industry claims statistics since 2011 and this year extended its remit to include the actual ratio of claims paid for the first time (See Box). It regards its next logical step as coming up with suitable statistics relevant to rehabilitation, and is kicking off this process in meetings involving insurers and other interested parties. As with its claims statistics, it will only be focusing on producing industry aggregates – not league tables via which individual providers can be compared.
Building up evidence on behalf of rehabilitation is also very much on the agenda of the Association of British Insurers (ABI), as evident in its report Welfare Reform for the 21st Century.
Grid expects to be working in conjunction with the ABI – although the ABI will also want to cover individual income protection.
Munich Re head of business development Lee Lovett is on Grid’s steering committee and is also responsible for organising its annual claims surveys. He reports that Grid did actually talk about rehab data last year but felt at that time that it was too hard to measure. However, in the survey of 2014 claims due to be published in the second quarter of 2015 it “has the ambition to include some data on rehab.”
Lovett says: “Income protection was the most difficult product to quantify when we first included details of claims declined but we did manage to agree a consistent measure. I’d be reasonably certain we will come up with at least one or two measures we can aggregate for rehabilitation but the big challenge is to work out which number or set of numbers we are going to arrive at for this.”
A prerequisite for producing any such worthwhile statistics is the ability of insurers to monitor their own data, although it is clear that some already have systems in place. Legal & General, for example, reports that 75 per cent of its scheme members who are off work return within six months and 60 per cent of these do so in conjunction with its intervention. Furthermore, half of the remaining 40 per cent have continued to talk over the phone with a Legal & General rehabilitation specialist.
But there is also the potentially far greater problem of whether insurers would be comparing like with like in the figures they submit. For example, an insurer other than Legal & General might have included those who had only received phone help as having benefited from intervention rather than presenting them in a separate category.
Portus Consulting director of consulting David Dolding says: “How do you compare a visit from one of Unum’s vocational rehabilitation consultants with a phone call from another insurer saying you need physio? Do we include employee assistance programmes (EAPs) and, if so, how do we deal with the fact that some are much better than others? Insurers with the best statistics may not be providing the best service.
“If an insurer is saying it has outsourced a course of CBT or an occupational health referral then the statistics shouldn’t be too hard to get but it’s measuring the quality that’s difficult. The final proof is how many people do insurers get back to work but one insurer with a book made up largely of blue collar workers may differ from others who deal mainly with professional services.”
The Holy Grail would seem to be if Grid could arrive at a figure that demonstrates the average
percentage of premium that an employer effectively stands to get back as a result of benefiting from insurers’ rehabilitation facilities. As such a figure would effectively become a sales aid it would probably need to be externally validated by a suitable body. The Chartered Institute of Personnel and Development (CIPD) would be an obvious possibility.
“A lot of employers never have a claim from one year to the next but if a percentage of premium can be proved to be going towards preventing claims it could help,” continues Dolding. “Only recently I was talking to clients who haven’t been using any rehabilitation services and have been very late in notifying claims but have been commenting on their increased premiums. By explaining that they haven’t been making the most of things we have changed their attitude but it would have been easier to make the case with statistics.”
Canada Life Group Insurance marketing manager Paul Avis points out that if Grid can take the lead and produce an industry-wide set of rehabilitation statistics then other rehabilitation bodies may start doing so as well.
He says: “Grid has proved that it can deliver complex sets of data on an industry-wide basis but the challenge here is that it’s not only group risk providers that do rehab. Major occupational health providers might want to join in, so might employer’s liability providers.”
Nevertheless, Avis also warns that if the group risk industry wants to help grow this area of the market and compete with the likes of Germany, Holland, Australia and New Zealand, it must help the occupational health industry address its skill shortages. With only between 4,000 and 5,000 properly trained occupational health personnel to recruit from “The UK is already running on an engine without oil.”
GRID PUBLISHES CLAIMS PAYING PROPORTIONS
In May 2014 Grid broke significant new ground with the inclusion of the percentage of new claims paid for group risk products in 2013.
Benefit Number Value of Average % of new claims
of claims 2013 claims paid claim amount paid
Group Life 8,803 £876.8m £99.603 99.6%
Group Income Protection 14,501 £318.0m pa £21,930 pa 82%
Group Critical Illness 798 £49.9m £62,582 81%
Totals 24,102 £1,244.7m
Grid spokesperson Katharine Moxham says: “We have followed a rigorous framework to ensure both credibility and consistency, and our commitment to publishing this data has gone well beyond what the FCA (Financial Conduct Authority) mandates, and is in the true spirit of transparency.
“I’m really proud at what Grid has achieved to date, bearing in mind it’s been done on a voluntary basis. The prize is being able to clearly demonstrate the effectiveness of group income protection premiums both in terms of getting claims paid and getting people back to work.”
ABI DEMONSTRATES AWARENESS OF REHABILITATION
A few years ago the benefits of rehabilitation could well have gone under a researcher’s radar but the ABI has certainly not been guilty of any such omission in its briefing paper ‘Welfare Reform for the 21st Century’ published this October.
Whilst acknowledging that the precise impacts from rehabilitation are difficult to identify in all cases, the annual gains from return to work activities are estimated at around £20 million for tax payers, £5 million for individuals and £15 million for employers.
The paper refers to the March 2014 report for Zurich ‘Income Protection – Working together to improve take-up’ in which Kyla Malcolm highlights early response rehabilitation services offered by group income protection insurers.
It also references the 2013 Work Foundation study ‘Reducing Temporary Work Absence Through Early Intervention : The case of MSDs in the EU.’ This studied 13,000 employees in Madrid with musculoskeletal problems and found that referring employees to specialist treatment after five days reduced temporary work absence by 39% and permanent absence by 50 per cent.
The Work Foundation study estimated that 35 million working days are lost across the EU to musculoskeletal problems each year at a cost of 2 per cent of EU GDP. It also estimated that if the UK had a similar referral system employees would be able to work an extra 62,045 days a year.
